May 16, 2012
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Canada smartphones soon to double as credit cards

May 16, 2012

TORONTO - Canadians may soon be able to pay for purchases with a quick tap of their smartphones after a major bank and the country's largest wireless carrier struck a deal to embed credit card information on handsets equipped with a chip to transmit data.

Photo: Corbis

Rogers Communications Inc and Canadian Imperial Bank of Commerce later this year will launch the so-called mobile wallet on some BlackBerry models from Research In Motion Ltd. Devices from other handset makers are expected to follow.

The tool allows shoppers to pay by simply tapping their phone on a special electronic reader already installed at many Canadian retailers. Transactions will credit a CIBC customer's existing loyalty program.

"It will no doubt change the way Canadians pay for purchases," said David Williamson, head of retail banking at CIBC, the country's fifth largest bank, which expects to add debit cards to the service at a later date.

The agreement could mark the beginning of a Canadian boom in mobile payments, a concept that has met with limited success in Japan, South Korea and other countries where it has been introduced. Meanwhile, Google and others are setting up similar payment systems in the United States.

Other big Canadian banks and telecoms are expected to follow the lead of CIBC and Rogers in the coming months.

The Roger-CIBC deal was announced the day after Canada's banking industry published a set of guidelines to support open standards for mobile wallets.

The country's third-largest wireless operator, Telus Corp, has said it is working with a number of banks to offer a mobile wallet to its customers in the near future.

Many Canadian retailers are already using the readers. Found mostly in fast food outlets, gasoline stations, grocery and convenience stores and coffee shops, they work with existing credit and debit cards that emit similar signals.


Rogers had 9.3 million wireless customers at the end of March, but only about 300,000 currently use phones equipped with near field communications chips that enable the phone to communicate securely with the reader.

NFC chips are considered a safer alternative to traditional magnetic strips, which are more easily hacked.

The carrier expects that number to grow to 750,000 by the time the wallet is launched. All its customers are expected to have phones equipped with NFC chips within three years.

The potential value of mobile payments is difficult to quantify, given that research firms define the market in different ways. But all agree the sector will boom.

"In a few years, a digital wallet will be just as common on a smartphone as a camera is today," said Rob Bruce, president of communications for Rogers.

Globally, NFC-based mobile payments are expected to exceed $13 billion by 2013, according to research firm Gartner, rising from just over $7 billion in 2011.

Even so, NFC is still dwarfed by payments made via text message or websites accessed through mobile devices, which together accounted for transactions worth more than $90 billion in 2011, Gartner said.

Shoppers will typically be able to use the digital wallet on purchases of C$50 or less. Customers, who can choose whether to add a password to the wallet, will keep existing fraud protection from the bank.

Rogers is paying CIBC a flat fee for every set of credentials it embeds on one of its phones. It said the service will cost customers or merchants nothing.


RIM has put NFC chips in most of its latest BlackBerry 7 phones, and plans to install them in all of its next-generation BlackBerry 10's, due later this year.

Nokia Oyj, Samsung Electronics Co Ltd, H TC Corp and others have also recently launched NFC-enabled phones. Berg Insight expects sales of such devices to triple to 100 million handsets this year.

But industry watchers say Apple Inc will have to install the chips in the next iPhone model for the system to really take off. Apple has not revealed any specific NFC plans.

The carriers, and to a lesser extent the banks, are threatened by a rival mobile payment system from Google, which plans to bring its Google Wallet to Canada.

Currently offered via Nexus S phones on Sprint Nextel Corp's U.S. network, Google Wallet cuts the carrier out of the equation and does not charge merchants or the credit providers either a fee or a cut on purchases.

Instead Google uses the system to collect transaction data for targeting ads to the individual consumer, a red flag for the banks.

In the United States, three big carriers have struck deals with three banks for the Isis payments venture and launched pilots in two small markets. But the partners still must persuade millions of merchants to upgrade their payment readers to enable them to work with smartphones, something the Canadian banks and carriers don't need to worry about.

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